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Part Seven Special Topics and Perspectives
Belch: Advertising and
Promotion, Sixth Edition
State Regulation
VII. Special Topics and
Perspectives
Regulation of Other
Promotional Areas
21. Regulation of
Advertising and Promotion
© The McGraw−Hill
Companies, 2003
In addition to the various federal rules and regulations, advertisers must also
concern themselves with numerous state and local controls. An important early
development in state regulation of advertising was the adoption in 44 states of
the Printers Ink model statutes as a basis for advertising regulation. These statutes
were drawn up in 1911 by Printers Ink, for many years the major trade publication of
the advertising industry. Many states have since modified the original statutes and
adopted laws similar to those of the Federal Trade Commission Act for dealing with
false and misleading advertising. For example, in California, the Business and Professional
Code prohibits “unlawful, unfair, or fraudulent” business practices and “unfair,
deceptive, untrue, or misleading advertising.”
In addition to recognizing decisions by the federal courts regarding false or deceptive
practices, many states have special controls and regulations governing the advertising
of specific industries or practices. As the federal government became less
involved in the regulation of national advertising during the 1980s, many state attorneys
general (AGs) began to enforce state laws regarding false or deceptive advertising.
For example, the attorneys general in New York and Texas initiated investigations
of Kraft ads claiming the pasteurized cheese used in Cheez Whiz was real cheese. 76
The well-publicized “monster truck” deceptive advertising case involving Volvo and
its advertising agency that occurred in the early 90s was initiated by the attorney general’s
office in the state of Texas. 77
The National Association of Attorneys General (NAAG) moved against a number
of national advertisers as a result of inactivity by the FTC during the Reagan administration.
In 1987, the NAAG developed enforcement guidelines on airfare advertising
that were adopted by more than 40 states. The NAAG has also been involved in other
regulatory areas, including car-rental price advertising as well as advertising dealing
with nutrition and health claims in food ads. The NAAG’s foray into regulating national
advertising raises the issue of whether the states working together can create and implement
uniform national advertising standards that will, in effect, supersede federal
authority. An American Bar Association panel concluded that the Federal Trade Commission
is the proper regulator of national advertising and recommended the state AGs
focus on practices that harm consumers within a single state. 78 This report also called
for cooperation between the FTC and the state attorneys general.
Advertisers are concerned about the trend toward increased regulation of advertising
at the state and local levels because it could mean that national advertising campaigns
would have to be modified for every state or municipality. Yet the FTC takes
the position that businesses that advertise and sell nationwide need a national advertising
policy. While the FTC recognizes the need for greater cooperation with the states,
the agency believes regulation of national advertising should be its responsibility. 79
Just in case, the advertising industry is still keeping a watchful eye on changes in
advertising rules, regulations, and policies at the state and local levels.
So far we’ve focused on the regulation of advertising. However, other
elements of the promotional mix also come under the surveillance of federal,
state, and local laws and various self-regulatory bodies. This section
examines some of the rules, regulations, and guidelines that affect sales
promotion, direct marketing, and marketing on the Internet.
Sales Promotion
Both consumer- and trade-oriented promotions are subject to various regulations. The
Federal Trade Commission regulates many areas of sales promotion through the Marketing
Practices Division of the Bureau of Consumer Protection. Many promotional
practices are also policed by state attorneys general and local regulatory agencies. Various
aspects of trade promotion, such as allowances, are regulated by the Robinson-
Patman Act, which gives the FTC broad powers to control discriminatory pricing
practices.
Contests and Sweepstakes As noted in Chapter 16, numerous legal considerations
affect the design and administration of contests and sweepstakes, and these
promotions are regulated by a number of federal and state agencies. There are two